The Economic Context and Covid-19
The housing market and the buy to let (BTL) market are set in the context of the wider UK economy. The impact of the Covid – 19 crisis on the economy will therefore be the starting point for this month’s market overview, before moving on the housing market and the BTL market.
Economists are united in the view that the UK economy is heading for a recession, but the key questions are the depth and duration of the recession.
According to Savills estate agents the central scenario is a sharp, short economic contraction in the second quarter of 2020, followed by a rebound in late 2020 or early 2021. For example Oxford Economics has forecast a fall in GDP in the UK of -2.5% in the second quarter of 2020 and rebound to +1.8% in the fourth quarter.
House Prices and Covid-19
A report from estate agents Knight Frank found that the political certainty provided by last December’s general election boosted housing market confidence during January and February.
This positive trend was expected to continue through 2020, but the arrival of Covid-19 has put this recovery on hold. Knight Frank forecast that house prices will fall by 3% in 2020 but once the current crisis passes and activity begins to resume house prices will start to increase in 2021.
The Rental Market and Covid-19
Savills expect less movement in the rental market in the next three months, because of the restrictions on viewings and moving house. There may be modest falls in average private rents paid as some landlords act to help tenants who are in financial distress.
However for the majority of households rental payments will continue as normal, with no significant impact on rental values in the short term. The arrival of Covid-19 is likely to result in slower rental growth over 2021, because of the impact economic downturn on average incomes.
The Mortgage Market and Covid-19
A report from mortgage broker Mortgages for Business presents a fairly optimistic picture of the mortgage market. Currently they expect the main impact to the service will be from difficulties with the valuation of properties because of restrictions on access due to social distancing requirements. To deal with this some lenders are increasing the scope of desktop valuations.
Investors continue to benefit from record low interest rates and the reduction in the Bank of England base rate from 0.75% to 0.1%. Some lenders are offering repayment holidays for BTL investors affected by Covid-19.
Conclusions
It is certain that the housing market and then BTL market will be affected by the coming recession, but to what extent and over what timescale are key questions for property investors. At the present time there are different views on both of these questions.
With the housing market largely on hold evidence of the pricing impact of Covid-19 will remain limited in the near term. This will be addressed in a future edition of the market overview as more information becomes available.
Based on the findings for rents this month’s market overview it seems likely that at least in the short term BTL investors should not expect the relatively high annual increases in rents that have been prevalent in recent years.
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK in the light of Covid-19 at our next PIM. We’ll be arranging this when government guidelines indicate that it is safe to do so.
We hope you will join us then.
For more info please Click Below
Property Options Bristol
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